Go back to Rio De Janeiro now. That's where our colleague Lisa Abramowitz is, of course, co-host of Bloomberg Surveillance. She's sitting down with the CEO of United Airlines, Scott Kirby. Lisa, take it away.
Thank you so much, David. I am here still in Rio with Scott Kirby, the CEO of United Airlines. Scott, always wonderful to speak with you.
Thank you for being here. I was actually surprised by the tone here, and I shouldn't be surprised because every conversation I have with different executives in the airline industry, things are better than expected. Demand's actually picking up. It's been more resilient. This summer's gonna be a record summer. You're hearing the same thing. Is that kind of your tone as well?
A lot of questions for people around the globe really, because we're a US airline, obviously, like, what do you think is gonna happen in The Gulf? And people are worried about oil prices, but demand, certainly US anything related to US, feel strong. I think there are other parts of the globe that maybe are a little more concerned about demand, but really strong in The US and mostly strong around the globe. And people have the view that, you know, that hope that this gets resolved at some point, and that we're back on track to what was looking to be a really good year to start the year.
Where are you seeing demand kind of fizzle around the world or at least fade just a touch in response to higher prices?
You know, we don't really see it at United because so you know, 80% of our traffic, even international traffic, is US point of sale. But you can, I think, see starting to see the glimmers that Asia is the first place. The impact of oil and refinery issues in Asia have been the worst. And I think Africa, certainly Middle East, has had an impact. So you can, I think, sense some worry, not really evidence of weakening of demand, but you talk to people in one on ones, you get some concern that if this goes, you know, sort of in the standard line all along. If this goes till July, it's gonna be a problem in March. If this goes into April, it's gonna be a problem. And it keeps getting pushed down the road, fortunately, because demand stays strong.
Well and so so far, you've raised prices about 20%. Cut capacity about 5%. Is that enough? You anticipate more price increases and more capacity limitations?
You know, time will tell. Depends on what's happening with the economy, what happens with oil prices. But I feel pretty good about where we are right now. You know, we laid out a path to getting to a 100% fuel recovery. It certainly looks like we're still pretty much solidly on that path. And oil even though oil has come down a little slow, actually, we'd move it a little earlier from when we said it. But we feel pretty good about where the demand environment is, and the consumer has been resilient even with fares up. But in truth, fares are up 20%, but they're still in real terms lower than they were in 2019. So air travel remains by far the best value as part of the travel chain and have been pleasantly surprised with the resilience of the consumer so far.
Is it all driven by the premium consumer who seems to be insatiable, or is it really across the board?
You know, I always talk about it, at least at United, we're investing nose to tail for our customers. And most of the things that we're doing for the product apply to everyone. Seatback entertainment, Starlink on every aircraft, great new interiors applies to everyone. And the premium has been stronger for a couple of years. It's still a little bit stronger, but it's pretty hard to, I think it's been strong across the board for us. But we skew to the high end. Even the economy pastures are skewing towards the top end of that K curve for air travel. International, of course, skews even higher. But we really haven't seen any noticeable cracks in demand sort of anywhere in the cabin.
I know you've been upgrading all your planes quite considerably. Nose to tail, whether it's the fold down seats to have you sleep across. Especially if you've kids. I wish that I'd had that one. Anyway, moving forward. Moving along. Do you find that it's difficult to upgrade as quickly as you want because of just some of the delays and deliveries that we're seeing in certain of the aircraft manufacturers?
You know, we got ahead of it. We started ahead. We ordered a lot of aircraft. We got ahead of the supply chain, as being the first, really back during COVID. We anticipated problems, so we actually over ordered because we anticipated problems. The problems have been bigger than we thought, but we've mostly managed through those, and seat manufacturing. Seats are a big issue across the industry. We've mostly stayed ahead. We've been somewhat impacted by it, but we've mostly stayed ahead of that. Even Starlink, for example, we're gonna have the whole fleet done, we expect, next year. It can't be done fast enough, but by being the first big airline to order, we're at the front of the queue. And so most of the things we're doing because we're at the front of the queue, we're much less impacted than other competitors around the globe.
There were reports that you were talking about Rolls Royce a couple of minutes ago, talking about how they've been a problem in terms of just honoring contracts. And what exactly is the role in some of the delays that we're seeing, particularly with Airbus?
Well, engines are really the issue. I think they're gonna constrain supply around the globe for probably the next decade. There's not enough engine capacity. There's something like 900 aircraft around the globe that are grounded right now that should be flying because they don't have engines that can fly. And it's a real, it's not an easy problem to fix, and it's gonna take time. And so, really, we need all the engine manufacturers. And the forgings and castings that go into the blades, the engines are really, I think, the biggest constraint. And that takes time to fix. When we start fixing that, all the aircraft that Boeing and Airbus, they're gonna be able to produce a lot of aircraft, I think. They're both starting to get things on track for producing aircraft, but they're gonna be producing gliders. It's just not enough engines.
Well, gliders are not gonna fly for the industry quite literally. I cannot imagine that, trying to have long haul flight on a glider. Do you think, though, that Rolls Royce has been a bad actor or not as much of a good actor relative to, say, some of the others that have been ramping up.
Well, that's certainly been our personal experience, with United at Rolls, and that's what I hear from others around the industry too.
Is that constrained to Airbus deliveries more than Boeing?
